Sdiptech AB (publ)

Thank you and welcome to this presentation of StipTech's report from the first quarter of 2025. Myself Ben Kleistrom and my colleague Susanna will guide you through the different performances of the group and as always we will start with a short presentation of what StipTech is. As most of you know already we are a technology group where our business units, they provide products and solutions for creating a more sustainable, efficient, and safe society. Very much of those solutions are built into infrastructures. That's also why we call ourselves an infrastructure technology group. Since the beginning of this year, we have divided ourselves into four business areas, and we will get back to that. those in more detail that's consisting currently then of the supply chain and transportation the energy electrification water and bioeconomy and safety and security and what's common for all our business units within these business areas are some key drivers and we're looking to acquire companies within these areas that all have some underlying long-term growth drivers very much based on that we have an aging infrastructure within at least Europe and many other parts of the world. We have an increase in consumption of infrastructure. We have seen increasing regulations around infrastructure. And not the least, we all strive for a more sustainable, efficient and safe society. So we think that we are well positioned for a good demand and stable growth over time. As you can see from the map to the right, that's where our companies are today and with our main offices. We also have subsidiaries, sub-subsidiaries in other geographies around the world. Currently 41 business units and we have had since the listing of our B share a 34% CAGR when it comes to our EBITDA profit. Apart from financial metrics and KPIs, we also have a goal of reducing our CO2 footprint from our internal operations. And that's measured as a CO2 per turnover in millions, that's with 24%. First since 2021 then during the first three years and our ambition and target is to reduce by 50% until 2026. So we're well on the track on that. So let's have a look at the first quarter then and some highlights. We think it was a quite decent report and outcome. We saw net sales increasing all in all with some 4%. However, organic, that was a minus of 4%. And to some extent, that's depending on that towards the end of the period, we saw some that our customers become a little bit cautious and perhaps waiting or postponing decisions for some investment decisions. But all in all, it was not a huge impact for Q1. Let's come back to what we see for current quarter and onwards. When it came to our EBITDA, that was flat more or less compared to last year, including acquisitions, meaning that we had a negative organic growth. some effects from that being still that we had some the organic sales were negative but also that we saw some cost increases in staff cost and also that we had in some units very tough comparisons and not the least in the business area water and bioeconomy and we will come back to that as well Our margin then obviously decreased a bit and we're of course not satisfied with that. So we're already taking different actions to have more cost efficient operations. So cost cutting more efficient operations in many different ways. We'll come back to that as well a little bit. The cash flow was stable and solid for the quarter and it was in line with last year. And we were happy to welcome three more companies into the group, sorry, two more companies into the group, phase three in UK, which we presented already last quarter, and then a very small add-on acquisition to our Dutch company, Sartus, namely a company called Supply in the Netherlands. Both of them very well positioned and contributing very well to the group already so let's have a look on the sales all in all as i mentioned we had an increase in total with four percent but a decline organically um the macro and geopolitical situation gave some impacts towards the end of the quarter When it comes to direct exposure to the US, it's very limited for us. It's roughly 4% of our sales is to customers based in the US. So that hasn't had a big impact yet when it comes to trade tariffs, etc. But we're having close dialogue with our units over there to see how we can mitigate that and for example, then putting more production and manufacturing for some of our products locally in the US to avoid as much as possible effects from tariffs. Trade flows going from Asia into the US, except for very small units from, for example, Taiwan, but not from China directly. So we're not hit by these very high tariffs anyhow. And when it comes to the EBITDA, As I mentioned, we're focusing them on different initiatives to increase profitability, to make sure that we adjust and adapt to the different situations. A main driver for increased costs have been staff costs, personnel costs, not the least in the UK, where almost half of our turnover is coming from. where we have seen increase both from a legal perspective in minimum wages coming along there from this quarter, but also from overall inflation on the Cirelli levels, for example. But we think at least we can adjust for that as well through increasing prices, not the least, but it takes some time for us to do that, to bring these cost increases over to our customers. mainly because we have long-term agreements with customers stipulating how much our products and services cost but as soon as we can we of course adjust. We had similar situation a couple of years ago on the inflation of the cost of goods increased and we said already then that six to nine months lag between cost increase and price increase for us typically and we're working of course to shorten that time lag so we can adjust prices as soon as we can and of course in all new deals we adjust for increased costs when it comes to the kegger on sales since the stock since the listing of the b share it has been 24 and you see on the graph on the right the development and you also see the organic growth on a last 12 month basis so um right now then for last 12 months q1 was zero percent last year ending with three percent organic growth then looking at the geographical split in more detail on the right hand side As I mentioned, we had almost half, 45% of our turnover is from customers in the UK. Our business units in UK, of course, also have exports. So the units in UK, they actually represent more or less half of all our turnover. As you see there, the US, 4%. Sweden is decreasing since we haven't made really any major acquisitions in a very long time. So it's down to below 17%. And then you see a split on some major geographies like Norway and Italy and other Europe and rest of the world. All in all, that section is increasing bit by bit since we are acquiring product based companies that have some exports. On the left-hand side, you see the split on the turnover by type of revenue. We're slowly increasing the share of product-based sales since we have both more or less divested or closing down businesses within service and installation, but we still like service and installation as long as it's on our own products. So we will always have some revenue streams for that, but it has decreased a little bit over the years. But I think this distribution of the turnover is pretty stable over time. Looking on the adjusted EBITDA corresponding development, you see on the graph there how it has developed, has been a 34% CAGR since 2017. It has slowed down a bit the last, year, year and a half. And also here you see the organic last 12 month figures in these circles. So last year it was a negative 2% and now on the last 12 month basis is a negative 7%. And as I mentioned, we're of course not happy or satisfied with that and do our best to get that back on track. All in all the EBITDA as mentioned was on the similar level as last year, the 251 million. in adjusted EBITDA. And to counterbalance the organic decrease, we had our acquired companies since last year contributing in a positive and very good way. We'll come back to that a little bit. And I will discuss the different business areas here in the coming slides. So wait to present that. And when it then comes to our business areas, as you may know them, that we have a new organization since the beginning of this year, the four business areas I mentioned. And here on this slide, you see the heads of the respective business area and also the distribution of sales and EBITDA. And as you can see, our biggest business area both from profits and sales is the supply chain and transportation and then the second biggest energy and electrification and then we have water by economy and safety and security is the smallest one but with the highest margin actually so We think it's about roughly the same number of business units within each business area. That's how we are organized, that the business area managers, they can have around seven, eight or so business units each to care for and take care of. So it's important then to have a good distribution of the responsibilities through the different business areas. If we then look at the performance on each of these, and start with supply chain and transportation we saw a slight decrease on the sales but a smaller increase of a beta meaning that the margin increased a bit we saw for a few companies especially the ones with solutions for logistics Could be in logistics centers, warehouses or container terminals that their customers postponed orders, waiting of executing some of their orders now towards the end of the period. But the underlying demand is stable. So some of the units in this business area had a very good sales development in the quarter. So all in all, very stable. And as you can see on the graph, the EBITDA margin two years have been stable between the 17 and 20 percent. Looking into the energy and electrification here, we saw increased sales and increased profits. of its increased more than sales. So we had a strengthening of the margin. And here we also had an acquisition contributing to the development that we did in the quarter phase three. And so many other of the units were performing very well, not to list the one with the electrification and energy efficiency, for example, our Our EV charging business in the UK, Rolex, performed very good and some other units within the energy efficiency sector. However, we have one unit which is a little bit relying on the climate providing services for construction of infrastructure during winter time that kind of throws up the ground and we can be heating different areas. They saw a mild winter making their demand a little bit less than usual, but still quite decent, but not as high as last year. So there were some ups and downs, but also here you see a stable margin over time and we think there are many good possibility for the companies in this business area to develop well then coming to water and bioeconomy here we saw the biggest drop in profitability the sales were more or less on the same level thanks to acquisitions from last year then contributing but we saw that some units had a challenging quarter with tough comparable numbers from last year. And we also here have some companies with quite a few employees and big number of staff, and they were then hit by the increased staff costs in the UK. As you may know, it's from 1st of April, the minimum wages increase also this year as it did last year. but this year it has had a greater impact on their overall staff costs. And those staff costs has increased already from the beginning of the year. So all in all for the whole group, the staff cost increased with 5%, which more or less correlates to our negative profit growth in numbers. um again of course we do our best to compensate for that through increased prices and also do some other activities and measures and perhaps should be noted also that last year q1 in 24 as you can see from the chart here on the right hand side the beta margin was extremely high 29 that's not a normal figure So we're now back at more normal levels on the EBITDA margin for this business area. And last but not least, safety and security. We had an increase in sales and also an increase in EBITDA. acquired companies from q4 last year contributing and we see overall a continued focus on safety which leads to good demand more or less across the business area and that the beta margin is a little bit lower than year ago uh it's more the mix of sales from these companies since we have made as i said acquisitions into this business area that makes also typically that they need a little margin changes over time can go up or down depending on the beta margin of the companies acquired so all in all very stable development for this business area So with that said, I would like to hand over to my colleague Susanna to mention a few words about different KPIs, financial KPIs.

Yes. Thank you Bengt. Then starting to look a bit at the cash flow and cash conversion. In the quarter, we had a cash flow from operations landing at 170 million and in the quarter, the cash conversion was at 74%. If we look at the rolling 12 months, cash flow from operations was at 822. So similar to previous quarter. And we had a cash conversion of 83%. So we're well within the range of 70 to 90% that we have as a sort of internal guideline. and any variance between the quarter is really relating to timing. Moving to the next slide and looking at some additional metrics. Firstly, we have the profit after tax. In the quarter, it was 74 million, so somewhat lower than the 110 million that we had the same quarter last year. We had a financial net of minus 91 million this quarter, which was quite a lot higher than the same quarter last year. It was 59 million then. The primary impact for this increase was unrealized foreign exchange losses of minus 25 million in this quarter and it was plus three same quarter last year so a variance of 28 million and that relates to the balance sheet and in the quarter both the pound as well as the euro has been decreasing with some six percent so that has given the impact we also have a somewhat higher interest cost in the last year because of higher debt levels, even though interest rates have been coming down. And both these effects also, of course, impact the earnings per share. And then moving to the debt leverage ratios. You can see those numbers here, but they are stable versus previous quarter. So we're pretty much in line with previous quarter. If you compare them with the same quarter last year, the variance is depending on acquisition pace and the payouts of contingent considerations. And then moving on to return on capital employed. And this was in line with last quarter, but slightly down versus the same quarter last year, now at 12.5% versus 13.2% last year. And here it's primarily the acquisitions in Q4 and Q1 that has impacted as we do not yet account for the full year profits for those acquisitions. If you look at return on capital employed for the underlying businesses, the average for those it's 56%. And of course, there is difference looking at businesses versus the group But over time with new acquisitions, organic growth and also higher cash flows, return on capital employed for the group will gradually increase. And with that, I'm handing back over to Beng to talk about acquisitions.

Thank you, Susanna. And yeah, as mentioned, we did one acquisition a bigger one during the con we have a very solid pipeline as always i would say um we have some prioritized geographies we have added for the for the ones of you who have been listening to us for some some time now We have added Germany, and that's partly because we now have access to underlying data for German companies. We can analyze that better. As you know, we have our in-house M&A team here in Stockholm, and so we do all the screening and sourcing of potential targets here centrally. Of course, sometimes with input from our business units where they have ideas that could be good acquisitions, but then everything is processed centrally and analyzed. And now we're testing in Germany a little bit more in practice and have already some discussions with German-based companies. But however, all in all, it's very important that we balance the pace of acquisitions against what's happening in the external factors and the uncertainties around us. And our guidance here on the volume to acquire, which have increased in the past from 90 million to now a range 120, 150. And as you can see, it's not a hard target. We have been below that, 23 and 24. And we are very cautious, of course, now as well to make sure that positions we do have a good solid outlook even in the current circumstances and we're very careful in our due diligence. So we make acquisitions when we feel comfortable that it's a high quality company and we do it also when we take all the other factors into consideration. So for the time being a little bit careful pace of acquisitions I could say. But our financial position is good. We have a new credit arrangement in place. We have extended that with almost a billion now, so we have more than 2.2 billion Swedish in accessible funding. reduced the interest rates all in all in this credit agreement which is of course good and added also a another one of the swedish major banks into this facility so we have three credit providers in that facility so we're of course very happy with that and it's also a sign that our credit providers have a great trust in us as a company we also have our sustainability loan bond out there as well. Even though we presented the acquisition of phase three in the last quarter could just mention it again, it has performed very good. It has and had already before we acquired it relationships with one of our other companies in the UK providing solutions for temporary electricity and so IDE systems. ID systems, which had a very great performance last year, since they have the Olympic Games in Paris as a very big customer, no Olympic Games this year. So of course, they will have a lower volume, both on sales and profit this year, but anyhow, a very good company. and then these two companies together phase three and id cooperate in a lot of areas and um so really looking forward to to support phase three going onwards and they have had a very good start and then we made i don't have a slide on that but we made as i mentioned in the beginning a small acquisition of a dutch company called supply which have them ai based solutions for for optical recognition, which our Dutch company Citus is using for their products and solutions for handling container terminals and logistic centers, etc. So the expertise we acquired, you could say, helped us in the development of enhancing and improving our solutions in that area. So also welcoming the staff of supply into our group. So as a summary, some key takeaways. As you saw we have a good cash flow ticking in. We made a lot of activities on that last year and we're still careful to make sure that we continue to get good cash flow from the operations. We had good positive contributions from our acquisitions. And we saw a good development in many of our business units with strong underlying trends and drivers. But as mentioned, we had some business units saw an effect from the uncertainties around the world and had a bit softer development, not the least towards the end of the quarter. And also some of the business units had a very strong comparable figures from last year. But we have a full focus on profitability and efficiency and of course doing a lot of activities for growth as well going forward and it's difficult of course to foresee how the current situation in the overall global scene will affect us during this quarter and I think no company can really say how that will affect them but we try our best to mitigate and navigate through these uncertainties that exist based on our decentralized model of having a portfolio of very strong and well-performing companies I should add also since it was also mentioned in the report that we evaluate of course all our companies all the time and specifically we also evaluate against criteria that we have for acquiring new companies and these criteria they were you could say we changed that quite dramatically some five six years ago in the summer of 2019 from that point in time and onwards we have tougher criteria than before we're evaluating companies that currently do not meet those criteria many of the companies acquired before that still meet this criteria but we have some that perhaps don't and could perhaps have a better home somewhere else it's not that these companies are not performing good they perform good according to um in their respective business nation on what could be expected but perhaps for us it's better capital allocation to use that money to acquire other type of companies meeting our current criteria So there may be possible divestments ahead. An example of that was the divestment we did a year ago, Swedish company called Frigotek that we sold to another Swedish group called the Nordic Climate Group, which was a very good home for that type of company. And we could use those money to acquire other companies than aligned with our criteria. So with that said,

to thank you for listening in and we open up for questions to ask a question please dial pound key 5 on your telephone keypad to enter the queue if you wish to withdraw your question please dial pound key 6 on your telephone keypad the next question comes from max bacco from seb please go ahead

Thank you, I hope you can hear me and hello Bengt and Susanna, thank you for taking the questions. So just perhaps starting with circling back on the outlook comment that you made Bengt and wrote in the report In the end of the quarter that you saw that some customers were holding off on planned projects and I think you alluded to Certus as one of the subsidiaries seeing this and I guess that makes perfect sense given their exposure to customers operating ports and so on and so forth. How should we interpret this? Is it something of units that saw this in the end of the quarter or is it more general phenomena that you see that's a bit more hesitant demand as of right now given the uncertainty?

Well, it's more to some specific business units, in addition to the one you mentioned, Sirtus, which is true, that that's one affected, another one, the Danish company called ELM, providing services to warehouse with their attachments for trucks, that you forklift trucks that you use in warehouses and logistics centers, that they have the same carriers and now the same type of postponements or delays of orders so they are the ones mostly affected it could be one or two or three perhaps other business units but it's not in general for all our units we have many units who are not affected as well so it's more in the current situation as we are today at the end of April it's quite difficult to see what how that will continue but so far it's only limited to a few of our business units

Okay, sounds good. And the next question perhaps to you, Susanna, I mean, you highlighted that new loan agreement signed here in the quarter with more favorable terms to refinance the existing ones. Do you have any comment on the interest rates on the new ones compared to the old ones? Any comment on that?

I mean, we haven't mentioned exact rates, but we are coming down on interest rates. We're also slightly reweighting, so taking up a large portion of the debt in pounds as we have many of our business units and quite a lot of the revenue in the UK. So I can, in general terms, I would say interest rates are coming down and we're shifting some higher portion of the debt to pounds in order to better match the revenues.

Okay, understood. And then the final question, very detail-oriented, but I noted in the report in the acquisition section that you wrote that If all acquired units, which is basically phase three connectors, had been consolidated from the beginning of the quarter, then sales would have increased with 50 million SEK and EBITDA with 14 million SEK, if I read it right. Is that correct? And how does that make sense, if I understand the question? It's like very high profitability.

yeah and it makes sense and we actually did one two very small acquisitions i mentioned this supply in netherlands and also we made a very small danish add-on to our chemitech but the absolute major part is coming from phase three which have had a very good start as i mentioned so it's correct numbers over there but uh perhaps to to assume them to um draw the line for the rest of the quarters for phase three um that they would keep up this pace for all the coming quarters but they had a very good start in the group which is always positive okay understood uh that was all for me for the moment so i'll jump back in the queue thank you very much thank you max

The next question comes from Nicholas Savas from Redeye. Please go ahead.

Hello, Bengt and Susanna.

Hi.

Hi. I was curious. You mentioned that you added Germany as a potential geography to make acquisitions in. How do you think about sort of having feet on the ground in Germany? Because I've heard from others that they think that sort of It's good to speak the native language in order to be an attractive buyer there. So could you please elaborate on that?

Yeah, and we have the same view as well, that it's when you get into the more close discussions and dialogues with German sellers, it's very good if you can speak German yourself. And of course, we will do this in a similar way as we did when we entered into Italy. We had a partner then at that time. who helped us with that part of the process. We will do the same then for German companies. However, we can still call them from here in Stockholm and we can approach them in different ways and set up meetings. And then when we're visiting them, we will most certainly have the German speaking person together with us during those meetings. So we're testing this. And we, as I said, we have a few already done companies in our pipeline that we're in dialogue with. So let's see how that evolves. But for sure, as in any geography, you need to know the culture and many other aspects of doing deals in that country.

Okay, thanks. And I was a bit curious also to ask a more general question about the UK, where you have the largest exposure. I mean, there's been a few negatives impacting the business climate there. I mean, one is the higher tax rates that we saw implemented last year, and now we have an increase in labor costs. So how do you think about sort of the development for, I mean, the business climate in the UK? Has this changed for you in the recent years amidst this?

as you said the well the tax rate was actually two years ago now increased quite dramatically from 19 to 25 percent so that of course hit our net profits and as you mentioned also there are different political decisions to increase staff costs in different ways um but it's still a very good geography when it comes to our type of companies where the demand is solid and good because not the least it's old infrastructure in many places for you who have been traveling around in uk you understand that needs to do a lot of development and improvements and there are also a lot of regulations around this which is good we think because that sets barriers for competitors to enter the market and it also gives some certainty about what you're supposed to deliver to you so All in all, UK is a very good geography for us and our type of companies. And we will probably make more acquisitions in the future in the UK as well. And the things, the ones we have are performing good.

So, yeah. Okay, perfect. And last question is a bit more data-oriented. And that's, I mean, you mentioned ID systems and but it had great sales due to the Paris Olympics last year. Could you help us in some way to quantify the impact that you saw there? Was that in the sort of 30, 40 million range in Q2, Q3, or was it more or less than that?

You mean the additional... they had a for them very high sales and profit last year all in all we don't expect them to live up to the that this year so they um but they still their ordinary business is developing very well but they uh you will and that will come mainly this reduction is mainly in q2 q3 then this year because that's where the major part of this olympic games came around but Let's see how they can perform without an Olympic game this year. But most certainly not at the same high numbers as last year. But I don't want to quantify that more in detail, but we don't know yet how it will develop during this year.

Understood. Okay, that's it from me. Thank you so much.

Thank you, Niklas.

More phone questions at this time. So I hand the conference back to the speakers for any written questions or closing comments.

Yes, and we have received some written questions. So I'm reading them top down here and try to answer them. One question is whether we retain our guidance for 5-10% organic revenue growth. Our target and goal is to have a 5-10% percent organic profit growth as we're now negative eight percent this quarter negative seven on the last 12 months basis so that's of course a tough tough target for this year um we will do our best but uh i wouldn't say that it's guidance for this year but we're of course aiming to eventually when the year is is done when we are at the end of q4 that we will be able to be in a positive range and we will do our best to be at least in the lower part of this range but that is still to be seen of course but um and then we have a question about how long it will take to pass the increased staff costs in UK and the customers. And yeah, it's typically a lag for us with some six months or even up eight, nine months from our very much contract based business, not the least one business unit in the business area, water and bioeconomy, the biggest one in that business area, who provide services to insurance companies to fix broken pipes, sewage pipes, water pipes in the ground. They have very long contracts with the insurance companies to provide these services at fixed costs. Could be one to three year contracts. It's very hard to say that we can change that industry to go to more flexible contracts. The insurance companies are of course big, big companies and so, but we have a strong So we do our best then to manage that. But it's at least a lag for them in order to change and update their price list towards their customers. So all in all, I would say it's a six month delay at least for those type of companies. And then we have also another question on our sales process of our remaining elevator business in Central Europe. And yeah, it's going according to plan. We have issued an investment memorandums in some time. And we're in the middle of the phase of collecting different bids and interests. We have great interest from many potential buyers, especially in the region and other parts of Europe, but also from others. So we're optimistic to be able to close this. So that hopefully can be reported in this coming quarter then, the status of that. But we're having a good response to our investment memorandum for this business that actually it's three different types of businesses, but they could be acquired, all three of them, or separately from a potential buyer. um and then there was a question about shutting down our our uh i would say only real construction related business we had in sweden yeah closed it down during last year so we don't have revenues from that company this year and of course that were since that company that still exists in a way since we have it um it merged into another swedish business unit but it doesn't do any new business or new projects but it's of course legally honoring and maintaining some of the agreements had with with the previous historic customers but that shouldn't really cost anything no material cost associated with that but of course a revenue last year which affected was not super high, because we already last year started to do that. But it were some percentage points at least contribution to the revenue last year. So that's a negative effect, you could say. On the other side, we also, as you know, later on during the year had some costs in that business unit, which will then benefiting from in the other direction when it comes to the beta um yeah perhaps i've answered that second question that it's still a business union existing um illegally even though it has been merged up to another company let's see here it's a little bit hard to read that um Yeah, pure divestments we're adjusting for. There was a question here whether we adjust for M&As, new companies. Why not adjust for divestments? But this is really not a divestment in a pure sense. It's a more closing, winding down type of situation. It depends a bit on them quarter by quarter how much that really would affect the numbers. But it's not a huge effect anyhow. I don't know if that was answered to this question, but it's at least an attempt. So if no further questions, myself and Susanna would like to thank you for dialing in and listening in to our conference call. And of course, happy to, if you have further questions to answer them later on, on email or so. But I would like to wish you a pleasant day for the rest of the day and talk to you soon again. Thank you. Thank you.